Rapid economic development over the past two decades has transformed the Southeast Asia region to the point where it is able to participate in international production networks which allows more exports of manufactured products, textiles and other primary high-quality valued-added products.
This transformation is due in part to foreign investors who have been attracted to the region because of favourable labour conditions, growth of connectivity and innovation and regional political stability as driven by the ASEAN vision. These changes have provided many additional growth opportunities for the region, which have in turn improved the wellbeing of ASEAN peoples through income generation and employment.
As the region has embarked on continued progress on the development of quality infrastructure, connectivity and innovation are keys for the region to ensure prosperity and sustainable development.
However, we can anticipate that post-Covid-19 economic recovery will drive increased economic activities and energy demand in all sectors which indicates the need to sufficient investment, especially in secured energy infrastructure and other hard and soft infrastructures, to fill the infrastructure gaps.
To satisfy this growing demand, huge energy-related infrastructure investment is necessary between now and 2040. The East Asia Summit (EAS) Energy Outlook 2019 projects $430-440 billion will be necessary in the power generation sector, including $149-226 billion for refineries and $16-28 billion for liquefied natural gas terminals (Kimura & Han ed 2019).
More broadly, the International Energy Agency (IEA) Outlook 2017 projects $2.1 trillion will be required for oil, gas, coal and power supply. More than 60 per cent of investment goes to the power sector with transmission and distribution (T&D) accounting for more than half of the total necessary investment.
The region is very fortunate to have different stakeholders supporting infrastructure improvement in a manner that bridges the missing links in ASEAN region. In this sense, ASEAN should focus on key development partners that promote long-term development sustainability, especially the focus on quality infrastructures, building human resources and bringing in knowledge and innovation to the region.
For example, Japan has been pioneering and promoting quality infrastructure for many years in order to empower Asia to be a growth centre and drive the global economy.
Most importantly, at the Group of 20 in Osaka in June last year, Japan successfully launched the initiative G-20 Principles for High-quality Infrastructure Investment which is key to promote investment for sustainable development. The principles take into account many aspects of sustainability to ensure that quality infrastructure is in harmony with local environment, communities and people’s livelihoods through generating local employment and facilitating technology transfer.
So far, Japan has committed $110 billion for quality infrastructure in Asia from 2015-2020 which will accelerate financial resource mobilisation from private companies around the globe into the region. This is in line with Japan’s global commitment to promote high-quality infrastructure investment to address sustainable economic growth, reducing poverty and disparity.
Other initiative such as Free and Open Indo-Pacific (FOIP) of the US, Japan, Australia and other regional partners has also been well received by ASEAN as an alternative or to some extent as complementary to other initiatives for infrastructure investment.
Further, to promote the principles of high-quality infrastructure, the US, Japan and Australia announced the Blue Dot Network in November last year as a multi-stakeholder initiative for governments, the private sector and civil society to join hands in order to promote high-quality infrastructure investment.
More specifically, Japan’s promotion of quality infrastructure in Southeast Asia region can be seen in their efforts to enhance ASEAN’s connectivity through core land and maritime corridors and soft infrastructure development. The land corridors are the high-quality hard infrastructure development connecting the South China Sea and the Indian Ocean, developing the Southern Economic Corridor (SEC), connecting Ho Chi Minh, Phnom Penh, Bangkok and Dawei as well as East-West Economic Corridor (EWEC) that expands from Danang to Mawlamyaing in Myanmar as a trading centre and seaport to connect Southeast Asia to India and other regions.
Another hard infrastructure development is the Maritime Economic Corridor which consolidates connectivity through the development of port, port-associated industries as well as energy and information and communication technology networks in major cities. This allows the Mekong sub-region to connect to Malaysia, Singapore, Indonesia, Brunei and the Philippines, thus enhancing connectivity in all of ASEAN.
In recent years, China also invested hugely in Asia infrastructure through its Belt and Road Initiative (BRI). It calls for strengthening “people-to-people bonds” and creating “win-win” cooperation between Chinese and host country stakeholders. However, if BRI is to be successful, the principles of high-quality infrastructure initiative will need to be considered in all infrastructure investments, and local communities developing BRI projects will have to play an active role and the host-country stakeholders will need to improve the quality of their governance systems.
To facilitate the quality infrastructure investment, ASEAN will need to work more toward institutional connectivity to facilitate international commercial trade and policies, removing behind-the-border issues as fast as possible. Innovation through research and development can increase capabilities and human resource development to attract more industrialised investment and high industrial technology.
People-to-people connectivity in ASEAN has also improved and the region will be deeply integrated not only in economic aspects, but also social and environmental aspects such as health insurance and environmental regulation and standards.
The region is moving toward innovative development (Industry 4.0) in which policies will be needed to facilitate the backbone of economies such as small and medium-sized enterprise (SME) development, highly efficient economies, smart cities, smart agriculture – basically innovations in all sectors. Strengthening institutional frameworks, establishing procedures, providing access to support services, credit markets and finance, technology upgrading, market expansion, entrepreneurship, can promote inclusive growth and development in the region.
ASEAN should be bold in facilitating all the investment opportunities guided by clear principles for quality infrastructure to promote sustainable development. ASEAN should also be responsive to the risks caused by the Covid-19 pandemic.
The countries and ASEAN as a group may need to work on a “green deal recovery” to bring back normal economic activities as soon as possible through various measures including financing green projects and promote quality infrastructure into the economic recovery package.
Han Phoumin is senior energy economist at the Economic Research Institute for ASEAN and East Asia (ERIA). The views expressed here are personal.
THE JAKARTA POST/ASIA NEWS NETWORK